UN Secretary-General Guterres: Please Protect Our Pension Fund

António Guterres, United Nations secretary-general, photographed in the Security Council on Feb. 21, 2017. UN staff members and retirees want him to ensure better management of their $54 billion pension fund. RICK BAJORNAS/UN PHOTO

United Nations staff members and retirees, concerned for many years about low-investment performance by our $54 billion pension fund and unprecedented delays in benefit payments, welcomed the adoption last December of a General Assembly resolution that allayed worries about attempts to privatize the fund. The resolution reaffirmed that UN financial rules and regulations remain the governing framework of the fund.

At the same time, the resolution highlighted serious problems in the fund, including prolonged vacancies in key posts and weaknesses in risk management, investment management and benefits payment management. It requested that Secretary-General António Guterres and the pension board take remedial action.

The Assembly asked the secretary-general to fill all vacant posts, improve investment performance, mitigate foreign-exchange losses, implement the antifraud and anticorruption policy, request the UN Office of Internal Oversight Services to conduct comprehensive audits of the fund’s policies and report on the performance of his representative for investments, Carol Boykin.

The Assembly asked the pension board to address the causes of the unprecedented delays in the payment of pension benefits and fill all vacant posts.

Who will fix the problems?

The question foremost in the minds of UN staff members and retirees is, Who will the secretary-general rely on to carry out these tasks? Is it Guterres’s four representatives on the pension board (one each from management, finance, human resources and legal); or the under secretary-general for management, a post that may soon see new blood? If so, what have these representatives been doing about the dysfunction on both sides of the fund?

Similarly, the board’s performance is not encouraging. Under its chair, Vladimir Yossifov, it muzzled the staff unions at last July’s annual board meeting in Vienna, intimidated the media who reported on problems in the fund and pushed to renew the five-year contract of the fund’s chief executive officer, Sergio Arvizú, a year ahead, despite indications of managerial deficiencies.

Why should Guterres not rely on Boykin and Arvizú to fix the problems? According to a board of auditors report, the fund lost $7.3 billion in investment income and $3.4 billion in foreign exchange in 2014-2015. In 2016, real return on investments was 2.93 percent, compared wih the fund’s 3.5 percent target. Failure to achieve its benchmark puts the fund’s solvency at risk.

A “Pensions and Investments” article on Jan. 23, 2017, noted that last year was exceptionally good for both American-based and global funds. Real returns on investment ranged from 18.40 percent in Britain to 2.30 percent in Japan and averaged 4.6 percent in the United States (see chart below).

The board of auditors report also noted that the Investment Management Division has no system to mitigate foreign-exchange losses or guidelines to select or evaluate outside managers. It has also reportedly never compared its brokerage commission fees with its peers to ensure that outside managers are not overpaid.

Boykin reportedly barred staff members of the Investment Management Division from recent investment committee meetings, where the problems raised in the General Assembly resolution were to be discussed.

A statement dated Feb. 21, 2017, by Warren Sach of the Federation of Associations of Former International Civil servants, our retiree representative organization, noted that Deloitte Touche began an independent review of fund investments on Feb. 13, 2017, as requested by the board. According to the statement, neither Boykin nor her staff has so far participated.

Last year, Arvizú presented to the pension board a positive report by PWC (PriceWaterhouseCoopers) on the fund’s IT system, which helped to push for renewing his contract a year in advance.

Yet a report leaked last December of a UN Office of Internal Oversight Services audit on the backlog in pension payments indicated that delays were caused by “poor implementation of the new IT system called IPAS, lax management, and a six month delay between problems emerging and action being taken.”

The final report is available to UN member states and will soon be publicly available.

Reliable sources note that this year, Arvizú has commissioned outside consultants to do a full review of pension payments to present to the board. Participants and beneficiaries are entitled to transparency about this current contract, given the General Assembly’s admonition in its resolution that the fund “avoid[s] the use of consultants in its operations.”

The UN Dispute Tribunal recently admonished Arvizú over his selection of a former Office of Internal Oversight Services staff member involved in audits of the fund’s IT system as that person sought a senior post in the fund, saying: “The UN is not a private corporation and its posts are financed through public funds, which calls for transparency and accountability in the recruitment system.”

In addition, a secretariat staff representative for the fund has been threatened with being fired, and Arvizú is said to be lobbying for this year’s board meeting to be moved from New York, ostensibly to avoid possible demonstrations by staff members and retirees there.

How Guterres Can Make a Difference

Retirees are gratified by the attention that the Federation of Associations of Former International Civil Servants, which has six nonvoting seats on the pension board, is paying to the fund’s investment issues. Still, concerns remain. Confidence in the federation’s president has been at low ebb for some time.

Linda Saputelli, until recently president of the association’s New York branch, consistently dismissed concerns about problems in the fund. She has not supported the staff unions’ efforts, tried to discourage an audit by the UN Office of Internal Oversight Services on the backlog in pension payments and supported the board’s push for early renewal of Arvizú’s contract.

How can staff members and retirees ensure that the General Assembly resolution will be implemented to keep our life savings safe and our fund healthy for current and future generations of beneficiaries?

One way is to ensure that our voices are heard. Elections are coming up in March for four participant representatives to the UN Staff Pension Committee, with voting rights on the board. Only current staff members are eligible to run or to vote. For any hope of turning around the situation in our fund, these elections must be free and fair. The record, however, is not encouraging. Arvizú has reportedly withheld contact information from the polling officers and forced them to eke out such details from the various UN departments instead, slowing the process.

For the fund to right itself, we need change in the leadership of the fund, the board and the Federation of Associations of Former International Civil Servants.

When the UN staff unions met with Guterres in January, one issue that was raised was the need to fix the problems at the fund — because without his personal attention, there is little hope for meaningful change.

The ship has been sailing off course for far too long. Secretary-General Guterres, please act now to protect our fund.

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The Assembly asked the secretary-general to fill all vacant posts, improve investment performance, mitigate foreign-exchange losses, implement the antifraud and anticorruption policy, request the UN Office of Internal Oversight Services to conduct comprehensive audits of the fund’s policies and report on the performance of his representative for investments, Carol Boykin.
Have these been done?

The Assembly asked the pension board to address the causes of the unprecedented delays in the payment of pension benefits and fill all vacant posts.For the fund to right itself, we need change in the leadership of the fund, the board and the Federation of Associations of Former International Civil Servants.: these are strong receonmmendations!
The Bureau of FAFICS is elected democratically yearly so its fully accountable for its actions.
Action at level of the new SG is capital.
And what about the Trump effect on UN and its pension fund?

Ms. Loraine Rickard-Martin’s “Worldview” on the UN Pension Fund, noted in “UN Secretary-General Guterres: Please Protect Our Pension Fund” published on 2 March, is an ambitious text but is not totally factual. Ms. Rickard-Martin is clearly a renaissance woman with in-depth understanding of human resources, economics, management, investment policy and so much more. That said, with this breadth of knowledge and insight, it is understandable that she could stumble on some smaller facts.

First and foremost, I want to commend her accuracy, as she rightly notes, investments are the responsibility of Secretary-General Guterres. His Representative is responsible for the investment of the 56 billion dollar fund and the management of the Investment Division of the Fund. All questions concerning investments must go through his office.

On the other side of the house, namely the secretariat of the Fund, directed by CEO Arvizú, Ms. Rickard-Martin misunderstood some facts. Regarding, for example, the case she mentions concerning the UN Dispute Tribunal, in which she cites a statement from the UN, saying “The UN is not a private corporation and its posts are financed through public funds, which calls for transparency and accountability in the recruitment system.” That is a misleading characterization and gives the impression that the Fund and the CEO of the Fund were judged to have not followed the procedures of the Office of Human Resource Management or OHRM, which was not the case. It seems she misunderstood that this case revolved around the use of a UN recruitment tool known as the “roster” system, which was developed by OHRM to speed up the recruitment process, and it is a system backed by staff, management and the General Assembly. Namely qualified candidates who are judged to be technically capable of assuming a specific post are listed.

In this particular case, a disgruntled candidate from a roster decided to dispute the selection made by the Fund of another rostered candidate. These sour grapes ended up adding six months to the recruitment time, thus leaving an important vacancy at the Fund (not to mention defeating the purpose of the “roster” system). Those who were concerned about the smooth functioning of the Pension Fund, especially at a time when it was processing more separation cases and serving more people than ever before in its history, were understandably perplexed. The case was an anomaly and Secretary-General Guterres supported the CEO and the highly qualified rostered candidate took up his position. Today the secretariat of the Fund is operating as efficiently as it ever has and has a five percent vacancy rate, which in the UN system is a commendable statistic.

Another point that Ms. Rickard-Martin slips into her article, namely that the CEO of the Fund “withheld contact information from polling officers” is absurd. It is great that she calls attention to upcoming elections, as everyone concerned with the Fund is interested in having the most representative Board as possible.

First and foremost, thanks to Lee for taking this opportunity to provide explanation on investment management and HRD issues. Would appreciate some meaningful explanation on the following 3 items:

1. Explain for ordinary retiree understanding of approx. 3.5 billion loss in FX transactions mentioned in UNGA Resolution A/71/265.
2. In the absence of direct participation in the UN PENSION BOARD elections, how retirees views could be heard in the board deliberations. It is implied that the current UN Retiree assns representation is seen ineffective, biased towards vested interests, and patronising when it comes to issues of national UN staff retirees.
3. How to bring about democratisation, transparency and accountability of UN PENSION BOARD?

He’s correct to describe the case as an “anomaly” as in “something that deviates from what is standard, normal, or expected.” It’s misleading, however, for him to imply that the UN Dispute Tribunal took issue with established procedures such as the use of the roster system.

And it’s incorrect — and gratuitous — for him to characterize the problem as a “disgruntled” appellant whose “sour grapes ended up adding six months to the recruitment time,” thereby adding insult to injury.

The appellant in the case, whom he glibly dismisses, has been eight years at the level of the vacant job and was seeking a parallel move to the job in question, while the selected candidate was at a lower level seeking a promotion. They were both rostered candidates.

The Dispute Tribunal twice suspended action on the contested decision (Orders 2016/147 and 2016/276), pending management evaluation and the UN Appeals Tribunal dismissed an appeal by management (judgment 2016/709). The Dispute Tribunal concluded “The decision was influenced by improper considerations, namely that the hiring managers are biased, favored the twice-selected candidate, and have predetermined the outcome of the process. There are serious and reasonable concerns as to whether this selection exercise was lawful. In the circumstances and on the papers before it, the Tribunal finds the requirement of prima facie unlawfulness to be satisfied.” (Para. 50, 2016/276).

As corroborated in the two judgments by the tribunal and the appeal by the administration (links), all public documents, Arvizu gamed the process in favor of a former auditor from the UN Office of Internal Oversight Services who had recently performed audits of the fund’s IT system, a clear conflict of interest.

Among its findings, the tribunal noted several anomalies in the process, including that none of the candidates were evaluated against any of the five competencies listed in the job opening (para. 38, 2016/147). Arvizu states as reason for selecting the former OIOS staff member was that he was “familiar with the functioning of the Fund based [on] his many years as the Chief, IT Audit assigned to the Pension Fund”(para. 37, 2016/147).

The Dispute Tribunal twice chastised Arvizu: “The UN is not a private corporation and its posts are financed through public funds, which calls for transparency and accountability in the recruitment process.” (Paras 42 and 49, respectively, 2016/147 and 2016/276).

Finally, after two suspensions and a dismissed appeal, a mandated management review was held, in which the hiring manager for the original selection process inserted himself into the panel. The same candidate was selected, for a third time by this management review, bringing to mind the proverbial “silk purse out of a sow’s ear.”

Woodyear then slyly elevates the Under-Secretary-General for management’s endorsement of the management review’s decision to the level of “support” by Secretary-General Guterres for Arvizu.

Woodyear’s charges that I “slip[ped] into the article” an “absurd” claim that Arvizu withheld contact information from polling officers organizing an upcoming election of participant representatives to the UN staff pension committee.

I received this information from the president of the Coordinating Committee for International Staff Unions and Associations (CCISUA), Ian Richards, who confirmed today in a Facebook post as follows:

“Despite what Lee Woodyear says, I can confirm that the CEO declined to share the names of electors for the upcoming elections with the polling officers. Also, what’s with the CEO moving the pension board meting to Vienna, when it is due to be held in New York?”

I’ve heard from other sources that the same situation occurred four years ago with the previous elections.

Arvizu is reported to be pushing his staunchest supporters inside the fund to run for these elections, and for the next pension board meeting (on the UN list of meetings and conferences as scheduled for 24 to 28 July 2017 in New York) to be moved from New York to Vienna for reasons having to do with ensuring a political environment more sympathetic to his main cause of ensuring renewal of his current five-year contract.

What is “absurd” is that Mr. Woodyear “slips into” his comment “that the secretariat of the Fund is operating as efficiently as it ever has.” There’s clear evidence to the contrary contained in the reports of the Board of Auditors (A/71/5.Add.16), the Advisory Committee on Administrative and Budgetary Questions (A/71/621), the audit of the backlog in pension payments by the UN Office of Internal Oversight Services, which will be made public shortly, and most recently General Assembly resolution A/RES/71/265.

Finally, it’s interesting to note that Woodyear apparently continues to function as Arvizu’s personal public relations arm. Paragraph 14 (b) of the report of the report of the Advisory Committee on Administrative and Budgetary Questions states: “The Committee considers that insufficient justification was presented for the creation of a Senior Communication Officer (P-5) position and therefore recommends against the approval of this temporary position; any related non post resources should be adjusted accordingly.” No one expects that Woodyear is going anywhere soon. Arvizu will find a spot for him where no matter what his official job description states, he’ll continue to promote the world-according-to-Arvizu version of reality until and unless Secretary-General Guterres acts to protect our fund.